Michels v. Watson

229 Cal. App. 2d 404, 40 Cal. Rptr. 464, 1964 Cal. App. LEXIS 1001

Opinions

LILLIE, J.

Defendant, Assessor of the County of Los Angeles, announced his intention to assess all property in the county at 25 per cent of its fair market value; plaintiff, a resident taxpayer and owner of a double-family dwelling, filed an action for declaratory relief to compel him to assess at full cash value. There were no oral proceedings before the trial court except argument. Determining the issues in favor of defendant, the judge concluded: “Article XI, section 12, of the California Constitution does not prohibit the assessment of taxable property by a county at a uniform fraction of its full cash value." Plaintiff’s appeal from the judgment comes to this court on an agreed statement.

The sole issue before this court is whether locally assessable tangible property may be legally assessed at a uniform fraction of its full cash value. Appellant contends that all property must be assessed at full cash value; respondent claims that constitutional and statutory provisions permit assessment of property subject to taxation at a uniform fraction of its full cash value as long as full cash value is the standard or basis of each assessment. In support of his position appellant has advanced extended argument based pri marily upon discussions found in numerous out-of-state eases; wMle it might be apposite and reasonable enough in the absence of controlling authority in California, or as an original proposition in the early stages of the administration of our revenue law, it is hardly persuasive now when, for almost a century, administrative, legislative and judicial authorities in this state have been in accord in the administration of our system of raising revenues to support local government. We seek neither to defend nor indict the property tax and its administration; our sole concern is with the legality of fractional assessments. It should be noted that while he criticizes at length the practice of assessing all property at a fraction of its fair market value, plaintiff has neither pleaded nor offered to prove that he has suffered or might suffer any detriment or discrimination as a result of assessment at 25 per cent or any other uniform fraction of the full cash value of his property. He claims that the only true way to achieve equality in assessment is by assessment at full cash value, but he has not complained of lack of equality in the assessment of his or any other property.

The following constitutional and statutory provisions set up the standard of valuation of property for assessment purposes for taxation in California.

Section 1, article XIII (previously contained in Const, of 1849, art. XI, § 13) adopted in 1879, provides: “All property . . . shall be taxed in proportion to its value, to be ascertained as provided by law. ...” Section 12, article XI, adopted in 1933, reads: “All property subject to taxation shall be assessed for taxation at its full cash value.” Similarly, section 401, Revenue and Taxation Code, enacted in 1939, provides: “Except as provided in this part, all taxable property shall be assessed at its full cash value.” Section 110, Revenue and Taxation Code, (once contained in Pol. Code, § 3617) defines “value,” “full cash value” or “cash value” as “the amount at which property would be taken in payment of a just debt from a solvent debtor.” “Pull cash value” is synonymous with “market value.” (De Luz Homes, Inc. v. County of San Diego, 45 Cal.2d 546, 561-562 [290 P.2d 544); Michael Todd Co. v. County of Los Angeles, 57 Cal.2d 684, 686 [21 Cal.Rptr. 604, 371 P.2d 340].)

Section 3627, Political Code, predecessor of section 401, Revenue and Taxation Code, was enacted in 1872 and, except for the addition of the word “taxable” (1881), remained unchanged until it became section 401 in 1939 and “shall” was substituted for the word “must.” While section 3627 specifically provided that “All taxable property must be assessed at its full cash value,” during its 67 years of existence, administrative and legislative authorities uniformly held to the view that it permitted property to be assessed at a uniform fraction, rather than 100 per cent of cash value, as long as full cash value was the standard or basis of each assessment. This view, acknowledged and accepted by appellate courts in this state, grew out of the early consistent practice of those administering our revenue law—the State Board of Equalization and assessors of each county—of assessing property at a uniform fraction of cash value, as reflected in biennial reports (since 1878) made by the State Board of Equalization to the Governor under section 3692, Political Code,¹ and in annual reports of results of certain studies (since 1921) by the State Board of Equalization to the California Legislature,² of which we take judicial notice. (Watson v. Los Altos School Dist., 149 Cal.App.2d 768, 772 [308 P.2d 872].)

Legislative approval followed the administrative practice of fractional assessments. At least since 1921 the California Legislature had been directly aware of the administrative interpretation section 3627 had uniformly received; and in 1933, as part of the “Riley-Stewart Tax Plan,” it proposed the incorporation in the California Constitution of a provision based upon, and almost identical with, section 3627. Thus, this amendment, article XI, section 12, provides: “All property subject to taxation shall be assessed for taxation at its full cash value.” (Senate Constitutional Amendment 30, Stats. 1933, eh. 63, pp. 3072-3073.) This amounted to an inclusion in the Constitution of what had been the law since 1872; it is apparent that no change in assessment procedure was intended or contemplated. The Legislature carried over into the constitutional amendment the substantially identical language of section 3627, under which it knew that market value was being used as a standard for fractional assessments. (See footnote 2.) Moreover, since 1890, numerous judicial opinions had recognized and recited the practice being employed under the administrative construction of section 3627. (San Jose, etc. R.R. Co. v. Mayne (1890) 83 Cal. 566, 570 [23 P. 522]; Southern Pacific Land Co. v. County of San Diego (1920) 183 Cal. 543, 545 [191 P. 931] ; Birch v. County of Orange (1921) 186 Cal. 736, 740 [200 P. 647]; Wild Goose Country Club v. County of Butte (1922) 60 Cal.App. 339, 343 [212 P. 711] ; Birch v. County of Orange (1927) 88 Cal.App. 82, 87 [262 P. 788]; Hammond Lumber Co. v. County of Los Angeles (1930) 104 Cal.App. 235, 244 [285 P. 896] ; L. W. Blinn Lumber Co. v. County of Los Angeles, 216 Cal. 474, 477, 479 [14 P.2d 512, 84 A.L.R. 1304].) In the absence of contrary indication in a constitutional amendment, terms used therein must be construed in the light of their statutory meaning or interpretation in effect at the time of its adoption. (Forster Shipbuilding Co. v. County of Los Angeles, 54 Cal.2d 450, 456 [6 Cal.Rptr. 24, 353 P.2d 736].) Persuasive, too, is the absence of mention of any basic change in the administrative practice of assessing at a fraction of full cash value in the “address” to the voters printed on the ballots used in the election in which this amendment was adopted. (Proposed Amendments to Constitution, Special Edition, June 27, 1933; Pasadena v. County of Los Angeles, 182 Cal. 171, 174 [187 P. 418].) Shortly after the adoption of article XI, section 12, but on facts arising prior thereto, the case of Rittersbacher v. Board of Supervisors (1934) 220 Cal. 535 [32 P.2d 135] (cert. den. 293 U.S. 592 [55 S.Ct. 107, 79 L.Ed. 686]) was decided, and therein no mention of any contemplated change was made by the court.

That the Legislature four years later, in 1939, again intended no change in the administrative practice of fractional assessments under section 3627, Political Code, and article XI, section 12, California Constitution, is reflected in its adoption of section 3627 as section 401, Revenue and Taxation Code. At this time administrative authorities, as before, were construing article XI, section 12, as permitting the use of market value as the standard or basis for assessment. Continuous, consistent and contemporaneous administrative interpretation of constitutional and statutory provisions is a persuasive force in their construction (Pearson v. State Social Welfare Board, 54 Cal.2d 184, 210 [5 Cal.Rptr. 553, 353 P.2d 33] ; City of Los Angeles v. Rancho Homes, Inc., 40 Cal.2d 764, 770, 771 [256 P.2d 305]) and, while not necessarily controlling, “is entitled to great weight, and courts generally will not depart from such construction unless it is clearly erroneous or unauthorized.” (Coca-Cola Co. v. State Board of Equalization, 25 Cal.2d 918, 921 [156 P.2d 1].) In the face of the many decisions in this state herein referred to, we cannot say that the administrative construction resulting in the assessment of taxable property by a county at a uniform fraction of its full cash value is ‘ ‘ erroneous or unauthorized. ’ ’ Similarly, contemporaneous construction of the Constitution by those charged with the duty of collecting taxes has been given great weight in Select Base Materials, Inc. v. Board of Equalization, 51 Cal.2d 640, 647 [335 P.2d 672]; and Coca-Cola Co. v. State Board of Equalization, 25 Cal.2d 918, 921 [156 P. 2d 1]. The practice continued as before,³ and today, throughout California assessors assess property for tax purposes at a fraction of its market value—they determine the market value of the property subject to taxation and apply to that value a common ratio.⁴

Further indicative of the legislative interpretation of article XI, section 12, and section 401, clearly contemplating fractional assessments, is the adoption of sections 1815-1832.5 Revenue and Taxation Code, in 1957. Under present sections 1818, 1821, 1822 and 1822.5, the State Board of Equalization must annually ascertain within each county the average ratio of assessed value to full cash value and determine the statewide average; and is empowered thereunder and by article XIII, section 9, to change the entire assessment roll of counties so that it will conform with the state-wide average.

Appellant, citing numerous cases both in and out of this jurisdiction, argues that article XI, section 12, is mandatory, does not sanction enforcement at the discretion of county assessors, is clear and requires no interpretation, does not legally permit the practice of fractional assessments, and for years has been erroneously construed by administrative authorities and, even though its construction has been approved by the Legislature, is void and of no effect. We do not question the authorities upon which appellant relies, but the administrative practice condemned by him is not the sole authority for fractional assessments in California. In the face of the specific provision in section 3627, Political Code, and now, article XI, section 12, California Constitution, and section 401, Revenue and Taxation Code, that all property shall be assessed at its “full cash value,” the practice of assessing at a uniform fraction of full cash value on a standard of full cash value based on the administrative construction of constitutional and statutory provisions, has been consistently followed from 1872 to the present with the knowledge and permission of not only the California Legislature but the courts. While the issue of its legality has never been squarely presented to them, for well over 70 years the practice of assessors of using a ratio of market value to assessed valuation has been repeatedly and consistently recognized, referred to, permitted and accepted by appellate courts in this state. As early as 1890 (San Jose etc. R.R. Co. v. Mayne, 83 Cal. 566 [23 P. 522]) and as late as 1960 (Pearson v. State Social Welfare Board, 54 Cal.2d 184 [5 Cal.Rptr. 553, 353 P.2d 33]) the Supreme Court acknowledged that assessed valuation is not the equivalent of market value of property. In San Jose etc. R. R. Co. v. Mayne (1890) 83 Cal. 566 [23 P. 522], it held that in condemnation proceedings the assessment of property for taxation is inadmissible as evidence of its value because it is made “not usually at the market value of the property. ” (P. 570.) In numerous subsequent cases the practice of assessing land “at a percentage of true value” (Southern Pacific Land Co. v. County of San Diego (1920) 183 Cal. 543, 545 [191 P. 931]), has been described, referred to, relied upon and acknowledged. (Birch v. County of Orange (1921) 186 Cal. 736, 740 [200 P. 647]; Wild Goose Country Club v. County of Butte (1922) 60 Cal.App. 339, 343 [212 P. 711]; Birch v. County of Orange (1927) 88 Cal.App. 82, 87 [262 P. 788] ; Hammond Lumber Co. v. County of Los Angeles (1930) 104 Cal.App. 235, 244 [285 P. 896] ; L. W. Blinn Lumber Co. v. County of Los Angeles, 216 Cal. 474, 477, 479 [14 P.2d 512, 84 A.L.R. 1304].)

In 1934 the Supreme Court decided Rittersbacher v. Board of Supervisors, 220 Cal. 535 [32 P.2d 135] (cert. den. 293 U.S. 592 [55 S.Ct. 107, 79 L.Ed. 686]); while the facts arose prior to the 1933 constitutional amendment (art. XI, § 12), the ease was subsequently at issue. Respondent claims that the court “specifically stated” therein that Political Code, section 3627, permitted fractional assessments; appellant says that any suggestion to that effect is pure dicta inasmuch as it is an equalization ease, simply refers to the rule that the taxpayer need not be assessed at 100 per cent of full cash value to claim discrimination, and no one therein contended that the taxpayer should be assessed at full cash value. An analysis of the case reflects less than that advanced by respondent but more than claimed by appellant. Therein plaintiffs alleged that the assessor had deliberately pursued an erroneous and discriminatory method of assessing different classes of property resulting in inequitable valuations of their property. In upholding the assessment the court stated that if plaintiffs were to prevail they must show that the assessor acted arbitrarily or in wilful disregard of the law and that it constituted a constructive fraud upon them; but that the documentary evidence attached to their petition counteracted such showing. A written report of the assessor made to the Board of Equalization (attached to the petition) showed the tremendous volume of work involved and the necessity for the assessor to promulgate certain rules and formula to secure uniformity in valuation. The court said: “In arriving at the value of all property for the purposes of assessment the assessor is guided generally by section 3617 of the Political Code which defines the term ‘value’ as ‘the amount at which the property would be taken in payment of a just debt from a solvent debtor. ’ This value is expressed in section 3627 of the Political Code as the ‘full cash value’ for purposes of assessment. It is the assessor’s recognized duty to see that the valuation placed on the various kinds of property shall be in proportion to the worth of such properties. If it is proportional and all are treated alike, no one contends that the taxpayer must be charged at full one hundred per cent, for such is not required by lato.” (Italics added.) (Pp. 543, 544.) While this was an equalization case and the validity of fractional assessments was not in issue, the court nevertheless indicated that there was no requirement by law that property be assessed at full 100 per cent of market value as long as the assessments were in proportion to the other of such property and all were treated alike. This conforms to the general view adhered to by the courts in this state that equality and uniformity are the constitutional and statutory goals in property taxation, rather than rigid adherence to 100 per cent of market value; and that these goals are achieved by means of using market value as a standard or basis and applying a uniform fraction to that standard. Apposite is the court’s reasoning in Switz v. Township of Middleton, 23 N.J. 580 [130 A.2d 15, at p. 22] : “. . . It is a mathematical truth in this regard there can be no essential difference between true value and a common ratio of true value applicable alike to all in the same class. In either event, the base is true value, and the assessments are in fact made according to the same standard of value.”

The above quoted language in Bittersbacher was cited with approval by this court in 1960 in A. F. Gilmore Co. v. County of Los Angeles, 186 Cal.App.2d 471, at page 476 [9 Cal.Rptr. 67]. This too was an equalization case wherein plaintiffs asserted that the County Board of Equalization had arbitrarily, discriminatorily and fraudulently refused to reduce their land assessment. More relevant is the court’s clear recognition, in its discussion at pages 477 and 478, of the practice of ratio assessments where market value is used as a standard.

While the validity of fractional assessments has never been at issue before the appellate courts, we have found no California ease in which it has been declared or even suggested that the practice of applying a uniform county-wide ratio to market value as determined by the assessor was violative of constitutional and legislative provisions, or in which the concept of fractional assessment has been rejected, criticized or disapproved. To the contrary, decisions from 1933 to the present have permitted the practice to continue under article XI, section 12, California Constitution and section 401, Revenue and Taxation Code. In most instances the court has held “fair market value” to be the equivalent of “full cash value, ’ ’ discussed the formula employed by the local assessor, and approved his use of a uniform ratio in the assessment practice. Nor have we found any case law in California supporting appellant's position; Eisley v. Mohan (1948) 31 Cal.2d 637 [192 P.2d 5], called to our attention by both parties, is, and appellant concedes it is, no authority for his contention herein.

Subsequent to Rittersbacher v. Board of Supervisors (1934) supra, numerous decisions recognized the practice of proportional assessment of property at less than full market value; in each instance the market value was used as the standard or basis for the assessment and all taxpayers similarly situated were treated alike. In Michael Todd Co. v. County of Los Angeles (1962) 57 Cal.2d 684 [21 Cal.Rptr. 604, 371 P.2d 340], the court approved the method of valuation employed by the county assessor in the assessment of negatives of a motion picture. The methods used in computing their valuation were described in detail; each resulting figure “was then reduced to 30 per cent and the remaining balance multiplied by 50 per cent to produce the assessed value.” (Footnote 5, p. 697.) The court found “. . . the method of valuation here employed by the Los Angeles County Assessor was proper.” (P. 697.) In a series of cases decided by the Supreme Court in 1955, involving assessments in Solano, San Bernardino, San Diego and Orange Counties, the assessor’s method of valuation and assessment, approved in each case, showed assessment of property at a fraction of its market value. In each, the court acknowledged the ratio applied to market value by the assessor; and, in holding “full cash value” to be synonymous with “market value” and that it is the “standard of valuation” (De Luz Homes, Inc. v. County of San Diego, 45 Cal.2d 546, 561 [290 P.2d 544]), recognized that fair market value provided the test or basis for the assessor in the assessment process, and, once the market value is determined by him, the use of a uniform county-wide ratio in arriving at the figure of assessed valuation. In Fairfield Gardens, Inc. v. County of Solano (1955) 45 Cal.2d 575, 577 [290 P.2d 562], a 25 per cent ratio of assessed value to market value was used in Solano County (p. 577) ; in Victor Valley Housing Corp. v. County of San Bernardino, 45 Cal.2d 580 [290 P.2d 565], the method used by the assessor included the reduction of the value of certain property “to 20 per cent thereof to allow for the ratio of assessment value to market value . . .” (p. 583); in De Luz Homes, Inc. v. County of San Diego (1955) 45 Cal.2d 546 [290 P.2d 544], assessment was made at a ratio of 35 per cent of market value (p. 559); and in El Toro Bev. Co. v. County of Orange, 45 Cal.2d 586 [290 P.2d 569], assessments were made at “market value less 30 per cent thereof to allow for the ratio of assessment value to market value.” (P. 588.) An assessment in which the assessor’s computation formula gave “. . . the sum of $1,612,500, as the present value of plaintiff’s one-year possessory interest; and 50 per cent of this amount, or $806,200, was fixed as the assessment figure,” was upheld in Kaiser Co. v. Reid (1947) 30 Cal.2d 610, 615, 616 [184 P.2d 879]. In 1927, 1928 and 1929 real property in the County of Los Angeles was assessed at 50 per cent of its market value. Of this the court, in Orpheum, Circuit, Inc. v. County of Los Angeles (1936) 12 Cal.App.2d 257 [55 P.2d 901], said: “The figure thus obtained [after computation] was taken as the ‘appraised value’ and thereafter the ‘assessed value’ or ‘full cash value’ was fixed by the assessor at fifty per cent of said ‘appraised value.’ ”(P. 258.) The court was aware of the local practice of assessing property at less than its fair market value, for at page 261 it quoted from a Los Angeles City Ordinance confirming and ratifying the practice of the assessor “of determining the actual cash vahie thereof by first determining the fair market value of such taxable property and by using an amount not exceeding fifty per centum of such fair market value as determined by said Assessor. ...” (P. 261.) Other cases referring to the practice of assessors of using a ratio of market value to assessed valuation, are Dawson v. County of Los Angeles (1940) 15 Cal.2d 77, 78, 81 [98 P.2d 495]; McClelland v. Board of Supervisors (1947) 30 Cal.2d 124, 134 [180 P.2d 676]; Rancho Santa Margarita v. County of San Diego (1932) 126 Cal.App. 186, 200 [14 P.2d 588]; Southern Cal. Tel. Co. v. Los Angeles County (1941) 45 Cal.App.2d 111, 122, 126-127 [113 P.2d 773]; Eastern Columbia, Inc. v. County of Los Angeles (1943) 61 Cal.App.2d 734, 739, 740 [143 P.2d 992]; Crothers v. County of Santa Cruz (1957) 151 Cal.App.2d 219, 221 [311 P.2d 557]; Lockheed Aircraft Corp. v. County of Los Angeles (1962) 207 Cal.App.2d 119, 123 [24 Cal.Rptr. 316].) In Pearson v. State Social Welfare Board (1960) 54 Cal.2d 184 [5 Cal.Rptr. 553, 353 P.2d 33], plaintiffs sought to qualify for old age benefits under section 2164, Welfare and Institutions Code, on the ground that they owned property with an assessed valuation of less than $5,000. The property consisted of 1,000 acres of land with estimates of market value ranging from $65 to $150 an acre. While the difference between the assessed valuation and the market value of the land was clearly apparent, the Supreme Court did not question the assessed value of the property, but accepted the assessed valuation as less than its full cash or market value in deciding the issue of eligibility for old age assistance.

That most of the above cited cases are equalization cases is no answer to the judicial recognition therein of the use and propriety of the practice of fractional assessments. Further, appellant says that the most they hold is that “market value” is equivalent to “full cash value.” But it is still the fact that therein the court referred to and considered the constitutional and statutory provisions in question in recognizing the use of ratio assessments where fair market value is used as a standard, and in connection therewith, use of the term “standard” of valuation. The language in these eases suggests that “standard” was used therein in the sense that “market value” (equivalent to “full cash value”) provided the criterion, test, rule or measure of value for the assessor, and that he is permitted, in meeting this standard, to fix the assessment at less than fair market value. (See for example, De Luz Homes, Inc. v. County of San Diego, 45 Cal.2d 546 [290 P.2d 544]; and Michael Todd Co. v. County of Los Angeles, 57 Cal.2d 684, 697 [21 Cal.Rptr. 604, 371 P.2d 340].) “Standard” in its common usage means “test,” “rule” or “measure”; it is so defined in Webster’s Third New International Dictionary, volume 2, page 2223, “Standard applies to any authoritative rule, principle, or measure used to determine the quantity, weight, or extent, or esp. the value, quality, level or degree of a thing . . . .”

Relying heavily upon certain cited language in numerous decisions out of this jurisdiction, mainly, Iowa, Massachusetts, Connecticut and New Jersey, appellant argues that the term “full cash value” means exactly what it says and there is no room for interpretation in article XI, section 12. While his argument might have been controlling in 1872 when section 3627, Political Code, was enacted, or even in 1933 or 1939, the present posture of article XI, section 12, California Constitution, and section 401, Revenue and Taxation Code in our revenue system admits of almost a century of administrative construction permitting the practice of fractional assessment, which has been scrutinized by tax commissions, sanctioned by the Legislature and acknowledged and accepted by appellate courts in this state. Thus we see no application of the foreign cases cited; they would be pertinent only in the absence of some judicial acknowledgment or approval of the assessment process used in this state in the past 90 years. Even then, legislation differed from constitutional and legislative provisions in California; while equality and uniformity of taxation seem to be the common goal, the action taken and the means employed to achieve it differ with the several states. In some cases the practice of assessing property at a fraction of full cash value was discussed and, in a few instances, held .not to be consistent with existing legislation, but the concept of fractional assessments was not rejected; in fact, in New Jersey and Connecticut legislation providing for the same was adopted. (Conn. Rev. Stats., §§ 12-64 and 12-77, adopted by the General Assembly, 1957 Session by Public Act No. 673 (§§ 6, 7) effective June 21, 1957; N.J. Stats., ch. 51, Law of 1960.) Further discussion of these cases we deem to be unnecessary.

For the foregoing reasons the judgment is affirmed.

Wood, P. J., concurred.

Footnotes

1

Report for 1881-1882, page 8; Beport for 1885-1886, page 5. Be-port for 1907-1908, page 12, states: “It is within the certain knowledge of this Board that the percentage of assessed value to actual value of property in the several counties varies from, say 25% to 80%. ”

Special Beport on Belative Burden of State and Local Taxes for 1912, page 12: “. . . the proportion of assessed value to actual value is 45.1%. This is the average for the whole state, the individual counties, of course, differing widely in their proportion of assessed to actual value. ’ ’

2

Beport for 1921-1922, page 71, states: “Property taxed in California on an ad valorem basis is not assessed at its full market value; in fact, is assessed on an average at a little less than 50% of its market value. ’ ’

Beport for 1923-1924, page 67, the State Board of Equalization reported to the Legislature that average assessment ratio was less than 50 per cent of market value.

Beport for 1929-1930, page 18, reported: “. . . The assessments average about 39.95% of the appraised or market value of the property.”

Beport for 1931-1932, reported state-wide assessments averaged 43.22 per cent of the market value of property.

3

Beport, Joint Interim Committee on Assessment Practices (1959), page 33 (Appendix to Journal of the Senate, Beg. Session, vol. 1 (1959) ; Senate Interim Committee Beport on State and Local Taxation (1953) pp. 70-71 (Appendix to Journal of the Senate, Beg. Session, vol. 3 (1953); Pinal Beport, Assembly Interim Committee on Bevenue and Taxation (1957), vol. 4, No. 7, p. 45.)

4

In 1963 real property was assessed at a state-wide average of 23.1 per cent, and in Los Angeles County the ratio of assessed to full cash value of locally assessible tangible property is 24.0 per cent. (Annual Beport to the Governor by State Board of Equalization, December 31,1963.)